WB Predicts 1.6 Percent Slump for Africa’s Economy

first_imgAfter slowing down to 3 percent in 2015, economic growth in sub-Saharan Africa is expected to fall further to 1.6 percent in 2016, the lowest level in over two decades, according to the World Bank Africa’s Pulse report.Launching its October 2016 report via teleconference yesterday with African journalists at their local offices across the continent, Albert Zeufack, World Bank Chief Economist, said the sharp decline in aggregate growth reflects challenging economic conditions in the region’s largest economies and commodity exporters. “Many of these countries continue to face headwinds from low commodity prices, tight financial conditions, and domestic policy uncertainties. Economic activity has been notably weak across oil exporters,” said Zeufack. Mr. Zeufack noted that economic growth in about a quarter of the region is showing signs of resilience. These latest figures, according to him, are outlined in the new Africa’s Pulse, the World Bank’s twice-yearly analysis of economic trends and data for the region. Mr. Zeufack said growth is far from homogeneous, suggesting that countries are growing at divergent speeds and many countries are registering a sharp slippage in economic growth.He named Ethiopia, Rwanda, and Tanzania as countries that continue to post annual average growth rates of over 6 percent. Several countries—including Côte d’Ivoire and Senegal—have become top performers. “Our analysis shows that the more resilient growth performers tend to have stronger macroeconomic policy frameworks, better business regulatory environment, more diverse structure of exports, and more effective institutions,” he said.Despite a recent pickup, he said commodity prices are expected to remain largely below their 2011–14 peaks, reflecting the weak global recovery.He said though the global recovery is faced with growing financing needs, commodity exporters have begun to adjust, but efforts have been uneven and remain insufficient. Against this backdrop, a modest recovery is expected with real Gross Domestic Product (GDP) in sub-Saharan Africa forecasted to grow 2.9 percent in 2017, and then rising moderately to 3.6 percent in 2018.He said in the Africa’s Pulse report that the region’s economic performance in 2017 will continue to be marked by variation across countries. While the larger economies and other commodity exporters are expected to see a modest increase in GDP growth as commodity prices continue to stabilize, economic activity is expected to keep expanding at a robust pace elsewhere in the region, supported in part by infrastructure investments.“With the external environment expected to remain difficult, deeper adjustment would be needed in some countries to contain fiscal and current account deficits and rebuild policy buffers,” he suggested. He further argued that along with adjustments to macroeconomic policies, countries will need to accelerate structural reforms to bolster medium-term growth prospects.“The decline in oil and commodity prices has hurt resource-rich countries and signals an urgent need for economic diversification in the region, including through improvements in agriculture,” he said.Mr. Zeufack further said agricultural productivity growth in Africa has lagged, adding that while production has increased elsewhere driven by better use of inputs and improvements in production technologies, in Africa they resulted mainly from expanding the area under cultivation.He said public agricultural spending in Africa has also lagged other developing regions, yet agriculture accounts for a third of region-wide GDP and employs two-thirds of the labor force, with the poorest countries most heavily reliant on it.He, however, said investments and smart policy choices are needed to foster growth in the rural economy, accelerate poverty reduction, and foster inclusive growth. For her part, Punam Chuhan-Pole, Lead Economist for World Bank Africa and the report’s author, said in the report that improving the productivity of smallholder farms is central to lifting rural incomes and reducing poverty in the region.“But unleashing this productivity requires investing in rural public goods such as rural infrastructure, agricultural research, and use of improved technologies, as well as in availability of good data and evidence,” she said.Ms. Chuhan said as African regional markets develop rapidly to reach an expected trillion dollars by 2030, the potential is enormous for increasing agricultural production and productivity. She said Africa’s Pulse finds that sub-Saharan African countries underfund high-return investments, and that increasing the efficiency of current public spending in agriculture while rebalancing its composition could reap massive benefits.Moving ForwardIn order to move forward, Africa’s Pulse recommends that countries take urgent steps to adjust to low commodity prices, address economic vulnerabilities, and develop new sources of sustainable, inclusive growth. By boosting agricultural productivity, countries will not only raise the incomes of farm households, but will also lower food costs and promote development of agro-industry. Share this:Click to share on Twitter (Opens in new window)Click to share on Facebook (Opens in new window)last_img read more